Chinese military bodies, state-run artificial intelligence research institutes, and universities have been acquiring Nvidia semiconductors banned by the United States, according to a Reuters review of tender documents. Despite export restrictions, Chinese entities have been purchasing Nvidia chips, including the A100 and H100, which were banned from export to China and Hong Kong in September 2022. The ban extended to the A800 and H800 chips developed by Nvidia for the Chinese market in October 2022. The continued demand for and access to these banned chips underline the challenges faced by Washington in cutting off China’s access to advanced U.S. chips, crucial for AI and sophisticated computers for its military.
Persistent Demand for Nvidia Chips in China
Chinese entities, including military organizations, universities, and research institutes, have been purchasing Nvidia semiconductors, particularly the A100 and H100 chips, despite export restrictions imposed by the United States. The ban on these chips was implemented in September 2022, with additional bans on the A800 and H800 chips in October 2022.
Importance of Nvidia Chips for AI Work
Nvidia’s graphic processing units (GPUs), including the A100 and H100 chips, are highly regarded for their efficiency in processing large amounts of data required for machine learning and AI tasks. Before the bans, Nvidia held a dominant 90% share of China’s AI chip market.
Lack of Alternatives for Chinese Firms
The review highlights the challenges faced by Chinese firms in finding alternatives to Nvidia chips despite the development of rival products by companies like Huawei. The demand for banned Nvidia chips underscores their significance in powering AI advancements in China.
Purchasers Include Elite Universities and Entities under U.S. Restrictions
The purchasers of Nvidia chips include elite universities and entities subject to U.S. export restrictions, such as the Harbin Institute of Technology and the University of Electronic Science and Technology of China. These entities have been accused of involvement in military matters or affiliation with military bodies contrary to U.S. national interest.
Challenges in Enforcing Export Restrictions
Despite U.S. export restrictions, an underground market for Nvidia chips has emerged in China. Chinese vendors reportedly acquire excess stock from the market after Nvidia ships large quantities to U.S. firms or import through companies locally incorporated in various locations.
Lack of Clarity on Chip Suppliers
The review found that neither Nvidia nor retailers approved by the company were among the suppliers identified in tender documents. The sources of these chips and how suppliers procure them remain unclear.
U.S. Efforts to Tighten Restrictions
U.S. authorities have pledged to close loopholes in export restrictions and limit access to chips by units of Chinese companies located outside China. However, the challenges in enforcing watertight restrictions on the export of small and easily transportable chips persist.
Impact on China’s AI Development
The main aim of U.S. export restrictions is to hinder China’s AI development by making it difficult to build large clusters of advanced chips capable of training AI systems. While the quantities purchased may not be sufficient for extensive AI projects, a handful of Nvidia chips can still run complex machine-learning tasks and enhance existing AI models.
Nvidia’s Response
Nvidia stated that it complies with all applicable export control laws and requires its customers to do the same. The company emphasized its commitment to taking immediate and appropriate action if it learns that a customer has made an unlawful resale to third parties.
Future Developments
The Reuters review indicates the persistence of demand for Nvidia chips in China despite export restrictions. As the U.S. seeks to tighten controls, the chip war between the two countries is likely to continue, with implications for AI development and technological advancements in China. The lack of viable alternatives to Nvidia chips further complicates the landscape, highlighting the ongoing challenges in managing chip supply chains and export controls in the global semiconductor industry.
